The stock opened regular trading on a downtick and then collapsed, closing at $16.82 down $2.44 (12.67%).
The press release (80% disclaimers and caveats) comes through BusinessWire, a Berkshire Hathaway company and you have to think Warren Buffet believes those 84,000 miles of infrastructure assets would be a nice Christmas present for Charlie.
I mean, just as was the case with Enron, there's a real company underneath all the financial engineering.
From Barron's:
December 4, 2015, 2:34 P.M. ET
Kinder Considering Dividend Cut; Stock Down 25% this Week
Shares of pipeline giant Kinder Morgan (KMI) continued to slide Friday after the company issued a statement saying that it is considering cutting its dividend.Here's the Kinder Morgan press release via BusinessWire:
Management said it could sustain its dividend growth goals in 2016, but that it might instead use the cash for its capital needs. By 2:15 p.m. ET, the stock was down 8% to $17.74, which was better than the 52-week low of $16.56 hit soon after the release. Kinder started out the week at $23.82.
Here’s the key passage in the statement:
KMI has now completed its 2016 budget process and expects to generate 2016 distributable cash flow of slightly over $5 billion, which would be sufficient to support dividend growth in the range discussed in the third quarter call. Alternatively, this cash flow can be used to fund some or all of KMI’s equity needs for 2016. KMI’s board will be reviewing the dividend policy and financing plans in the coming days and the company will announce that policy and plan when finalized. KMI will construct its 2016 plan to maintain an investment grade rating with all three agencies. Further KMI does not plan to issue equity at current prices.
Given that the company doesn’t want to issue more equity and plans to retain its investment grade rating (which means it can’t issue more debt), a dividend cut seems likely. Credit analysts consider a company’s debt to Ebitda (earnings before interest, taxes, depreciation and amortization) ratio when setting a credit rating. With Kinder’s profits falling along with energy prices, that ratio is heading in the wrong direction.
It could sell assets (but that would have to be at bargain basement prices) or find additional alternative financing, but it already issued a big chunk of convertible preferred shares this year....MORE
Kinder Morgan Announces 2016 Financial Expectations
- DCF per share Consistent with Previous Guidance of 6 to 10 Percent above 2015 Dividend
- KMI to take required action to maintain investment grade rating and stable outlook
- 2016 cash flow sufficient to fund growth capital needs in 2016
- KMI will announce capital funding plan and dividend policy in the coming days
In its third quarter earnings call, Kinder Morgan, Inc. (KMI) indicated an expected 2016 growth range of 6 to 10 percent over its 2015 target dividend of $2.00 per share. KMI has now completed its 2016 budget process and expects to generate 2016 distributable cash flow of slightly over $5 billion, which would be sufficient to support dividend growth in the range discussed in the third quarter call. Alternatively, this cash flow can be used to fund some or all of KMI’s equity needs for 2016. KMI’s board will be reviewing the dividend policy and financing plans in the coming days and the company will announce that policy and plan when finalized. KMI will construct its 2016 plan to maintain an investment grade rating with all three agencies. Further KMI does not plan to issue equity at current prices.Earlier:
Kinder Morgan, Inc. (KMI) is the largest energy infrastructure company in North America. It owns an interest in or operates approximately 84,000 miles of pipelines and approximately 165 terminals. The company’s pipelines transport natural gas, gasoline, crude oil, CO2 and other products, and its terminals store petroleum products and chemicals, and handle bulk materials like coal and petroleum coke. Kinder Morgan is the largest midstream and third largest energy company in North America. For more information please visit www.kindermorgan.com....MORE
Kinder Morgan: In Which Izabella Kaminska Declines To Take A Victory Lap And Instead Highlights Recent Analysis (KMI)
Yesterday:
Kinder Morgan Sets Multi-Year Low As Reality of Approaching Junk Status Sinks In (KMI) UPDATED
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Natural Gas: Chesapeake Energy Stock Down 10% as Debt Exchange Shows How Low On the Totem Pole Equity Actually Is (CHK)
Natural Gas: EIA Weekly Supply/Demand Report
